Former Bush adviser Dr. Pippa Malmgren said that Ireland will face 20 years of no growth because the European Central Bank (ECB) is unable to increase inflation to ease Ireland’s debt.
Malmgren, who was an economic advisor to former President George W. Bush during his administration, spoke in Dublin on October 1, 2013 at a conference organized by Davy stockbrokers. At the conference she said that Ireland could handle its debt through austerity, but the price would be 20 years of no growth.
The Irish Times quotes her, “But you have to accept 20 years of no growth. That’s the only other option. It’s what European policymakers expect Ireland to do. The question is, do the Irish people have the tolerance to take that much pain?”
Malmgren said Ireland should consider leaving the euro and devaluing the punt, the currency Ireland used before switching to the euro. She believes that Cypress may leave the euro zone. She said, “If a country can leave and devalue, it raises the question for Ireland- what is the cost of staying in?”
She noted that inflation is starting to appear in Germany in basic food items including potatoes and milk. Malmgren believes this inflation will force the ECB to keep control over inflation and she warned that once inflation begins to spiral it cannot be controlled. “Germany doesn’t want inflation. Everybody else needs it, that’s the heart of the problem.”
The punt was first introduced under the Currency Act in 1927. Equal to 100 pence, the punt was the currency of the Republic until 2002 when it switched to the euro. After the housing bubble, which had grown during the Celtic Tiger burst, the Anglo Irish Bank was nationalized in January 2009. The failure of the Anglo Irish Bank has cost Ireland about 41 billion dollars and this sum is being liquidated under the Irish Banking Resolution. The Irish Banking Resolution Corporation is a government owned bank formed in 2011 to provide personal and corporate accounts, loans, mortgages, and insurance services. Austerity measures by the Irish government have proven controversial.